The Investment Forecast Calculator allows you to select individual investments, choose a growth rate, and work out what they will be worth at different time periods in the future.
One of the most under-appreciated parts of personal investment management is forecasting exactly what a particular rate of return might look like for you over the long term. Humans are not predisposed to being able to understand compound interest in a back-of-napkin fashion.
Exponential growth, despite being so common in not just finance but the world around us, is quite a difficult concept to visualise, and often yields some incredibly surprising results.
It's useful then, before making an investment, to bring up an Excel spreadsheet or get your calculator out, and work out what the growth looks like at various different interest rates.
We are not here to tell you what sort of % returns you can expect from different asset classes (although the forecast tool on the Strabo dashboard gives you some neat options), so have a look at historical return data for the asset you're thinking of and see what happens.
Bear in mind as always, that past performance is not an indicator of future returns, and that you won't be able to predict declines and market crashes. That being said, most asset classes average out at reasonably consistent return profiles over the long term, so you have a rough idea of what you're letting yourself in for.
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Now you've tried this, have a look at the difference when you make regular contributions to this investment. Over time, this will hugely increase growth as you simultaneously experience an increase in principal and an increase in compounding. This is where the real takeoff happens.
Use the monthly savings tab above to tweak your monthly contributions and see how the exponential curve bends. If there's one concept in personal finance you can take away from our educational content, it's this.
Little and often is the way to end up with a large enough pot to sustain you through retirement - we've lost count of the number of millionaires we've seen at retirement who did nothing except contribute regularly to an investment account for 40 years.
